Introduction
India is one of the world’s fastest-growing economies and a profitable market for foreign companies. Setting up a subsidiary in India could be a feasible approach for foreign companies to expand their operations and gain exposure to this large customer base.
In this blog, We CA on Web Pvt. Ltd. will provide a comprehensive guide on how to register a foreign subsidiary in India, helping you navigate the complexities of Indian corporate laws and set up your business successfully.
(A) Process of Registration of a Foreign Subsidiary Company in India:
1- Understand the Concept of a Foreign Subsidiary:
Before diving into the registration process, it’s essential to grasp the concept of a foreign subsidiary. In India, a foreign subsidiary refers to a company incorporated under Indian laws but controlled by a foreign entity or parent company.
2- Conduct Market Research:
Before taking any steps towards registration, conduct thorough market research to assess the viability of your business in India. Analyse the demand for your product or service, competitive landscape, target audience, and legal/regulatory frameworks relevant to your industry. This research will help you make informed decisions and develop a robust business strategy.
3- Choose the Right Legal Entity:
Based on your business objectives and requirements, select the most suitable legal entity for your foreign subsidiary. The options commonly chosen by foreign companies in India include Private Limited Company, Limited Liability Partnership (LLP), or Branch Office. Each option has its advantages and limitations, so consult with legal experts to make an informed decision.
4- Seek Professional Guidance:
Navigating the legal and regulatory framework in a foreign country can be challenging. Engage the services of a reputable legal or corporate services firm with expertise in foreign subsidiary registrations. They will provide valuable guidance, assist with documentation, and ensure compliance with Indian laws.
5- Obtain Digital Signature Certificates (DSC):
As part of the registration process, you will need to obtain Digital Signature Certificates (DSC) for authorized representatives of your foreign subsidiary. DSCs are essential for electronically signing documents and filing with government authorities.
6- Reserve a Unique Name:
Choose a unique name for your foreign subsidiary and check its availability with the Registrar of Companies (ROC) in India. The chosen name should comply with the naming guidelines set by the Ministry of Corporate Affairs (MCA).
7- Prepare and File Documents:
Navigating the legal and regulatory framework in a foreign country can be challenging. Engage the services of a reputable legal or corporate services firm with expertise in foreign subsidiary registrations. They will provide valuable guidance, assist with documentation, and ensure compliance with Indian laws.
- Memorandum and Articles of Association (MOA and AOA)
- Proof of identity and address of directors
- Board resolution and power of attorney from the parent company
- Consent to act as a director
- Financial statements and audited reports of the parent company
- Declaration of compliance with foreign exchange regulations
- Once the documents are ready, file them with the ROC along with the prescribed fees. It’s important to ensure that all documents are accurate, complete, and comply with the regulatory requirements.
8- Obtaining a Permanent Account Number (PAN) and Tax Registration:
Simultaneously, apply for a Permanent Account Number (PAN) and tax registration for your foreign subsidiary. PAN is a unique identification number required for various financial and legal transactions in India.
Caonweb advises clients should apply and register for (GST) Goods and Services Tax if their business activities fall under the ambit of GST.
(B)Post-Registration Compliances:
After successfully registering your foreign subsidiary, you must fulfil various ongoing compliance requirements. This includes maintaining statutory records, filing annual financial statements, conducting board meetings, and complying with tax and regulatory obligations.
It’s advisable to engage professionals who can assist you in meeting these compliances and staying updated with the evolving legal landscape.
The expert team of CA on Web Pvt. Ltd. assists you in complying with all the above-mentioned Post-Registration Compliances
Frequently Asked Questions (FAQs) – Registering a Foreign Subsidiary in India
Q)1. What is a foreign subsidiary?
A foreign subsidiary refers to a company incorporated under Indian laws but controlled by a foreign entity or parent company. It allows foreign companies to establish a presence in India while maintaining a separate legal identity.
Q) 2. What are the advantages of registering a foreign subsidiary in India?
Registering a foreign subsidiary in India offers several advantages, including:
Access to a rapidly growing market with a large consumer base.
Opportunities for expanding business operations and exploring new avenues.
Ability to enter contracts and conduct business transactions in India.
Limited liability protection for the parent company.
Enhancing credibility and trust among Indian customers and partners.
Q) 3. What are the legal entities commonly chosen for foreign subsidiaries in India?
The most chosen legal entities for foreign subsidiaries in India are Private Limited Companies, Limited Liability Partnerships (LLP), and Branch Office. Each has its characteristics, advantages, and limitations. Choosing the right entity depends on factors such as business objectives, ownership structure, and regulatory requirements.
Q) 4. Can a foreign subsidiary be wholly owned by the parent company?
Yes, a foreign subsidiary in India can be wholly owned by the parent company. Foreign companies can hold 100% of the shares of the subsidiary, subject to sector-specific regulations and guidelines issued by the Indian government.
Q) 5. What is the procedure for registering a foreign subsidiary in India?
The registration process for a foreign subsidiary involves several steps, including:
Conducting market research and choosing the right legal entity.
Obtaining Digital Signature Certificates (DSC) for authorized representatives.
Reserving a unique name for the subsidiary.
Preparing and filing the necessary documents with the Registrar of Companies (ROC).
Obtaining a Permanent Account Number (PAN) and tax registrations.
Complying with post-registration requirements and ongoing statutory compliances.
Q) 6. What are the compliance requirements after registering a foreign subsidiary in India?
After registration, foreign subsidiaries must comply with various ongoing requirements, including:
- Maintenance of statutory records and registers.
- Filing annual financial statements with the ROC.
- Conducting board meetings and maintaining minutes.
- Complying with tax regulations and filing tax returns.
- Ensuring compliance with labour and employment laws.
- Adhering to sector-specific regulations, if applicable.
Q) 7. Can I register a foreign subsidiary without visiting India?
Yes, it is possible to register a foreign subsidiary in India without physically visiting the country. However, it is advisable to engage the services of a reputable legal or corporate services firm in India to ensure a smooth and compliant registration process.
Q) 8. How long does it take to register a foreign subsidiary in India?
The registration timeline can vary depending on several factors, including the chosen legal entity, documentation requirements, and government processing times. On average, it can take approximately 4-6 weeks to complete the registration process, provided all the necessary documents and information are readily available.
Q) 9. Do I need to engage a legal or corporate services firm for registration?
While it is not mandatory, engaging a legal or corporate services firm with expertise in foreign subsidiary registrations is highly recommended. They can provide valuable guidance, assist with documentation, ensure compliance with Indian laws, and expedite the registration process.
Q) 10. Can I change the legal structure of my foreign subsidiary after registration?
Changing the legal structure of a foreign subsidiary after registration is possible but involves a complex process. It requires obtaining the necessary approvals, complying with legal requirements, and updating registrations with relevant authorities. It is advisable to consult legal professionals to understand the implications and requirements for such changes.
Conclusion
Registering a foreign subsidiary in India is a strategic move that can unlock immense growth opportunities. By following the steps outlined in this comprehensive guide, CA on Web Pvt. Ltd. can navigate you , for the registration process smoothly and establish a strong foundation for your business in India. Remember to seek professional guidance, ensure compliance with legal requirements, and stay proactive in fulfilling ongoing obligations. With careful planning and the right support, your foreign subsidiary can thrive in India’s dynamic business environment
Chartered Accountant by profession, CA Sanket Agarwal has an experience of above11 years in Cross Border compliance , Import Export , International Taxation & is a passionate content creator.